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GOVERNMENT SECURES LINE OF CREDIT FROM LOCAL BANKS

Government 21 Sep, 2020 Follow News

Hon. Minister for Finance and Economic Development, Roy McTaggart

By Staff Writer

 

The Cayman Islands government has finalised the emergency standby line of credit it has been negotiating with a consortium of local banks.

Hon. Minister for Finance and Economic Development, Roy McTaggart confirmed on Friday that a total of CI$ 330.4 million (US$403 million) has been secured.

The deal was sealed with CIBC FirstCaribbean International Bank (Cayman) Limited, Butterfield Bank (Cayman) Limited, Cayman National Bank Ltd and RBC Royal Bank (Cayman) Limited.

According to Mr McTaggart, “The terms submitted in the bid are keenly competitive” which he said showed that “the Government of the Cayman Islands continues to be regarded as a high-quality sovereign as is reflected in our Moody’s rating of Aa3.”

“It is very pleasing to me that we are seeing local commercial banks come together and submit a single bid to the Government of the Cayman Islands, thereby demonstrating their confidence in the Government and the country as a whole,” he stated.

Mr McTaggart described the signing of the facility as “a win for Government and a win for the people of the Cayman Islands.”

Under the agreement, CIBC FirstCaribbean International Bank (Cayman) Limited will provide S$115 million (CI$94.3 million), Butterfield Bank (Cayman) Limited - US$143 million (CI$117.26 million), Cayman National Bank Ltd - US$30 million (CI$24.6 million).

The amount is less than the initial amount of CI$ 500 million the Finance Minister had previously indicated the government was seeking.

However, both he and Hon. Premier Alden McLaughlin pointed out that the amount secured was adequate as a buffer for any financial needs the government might encounter in the near future.

Mr McLaughlin said. “This has provided the necessary buffer that we knew we would need one day. Because of our strong fiscal position we are in a better place than most countries. Whilst we have access to this line of credit, we do not expect to need to use it before the end of the second quarter of 2021.”

The Premier explained that “in effect, this is a much needed ‘insurance policy’ for the Cayman Islands.”

According to a government statement, “an Appropriation for a possible CI$500 million borrowing will be presented to the Legislative Assembly at its next meeting and to the Foreign, Commonwealth and Development Office for approval prior to accessing any of the funds from the LoC.”

It says: “This Appropriation will include the possible US$403 (CI$330) million loan under this line of credit as well as provide the ability of Government to borrow an additional sum up to CI$170 million, if it becomes necessary.”

At the expiration of the 18-month line of credit (LoC), any amount advanced and unpaid will be converted to a 15-year, fixed interest rate amortising loan.

Under the financing arrangement, both the LoC and the long-term loan are priced at 3.25% per annum – the current Prime Rate offered by local banks. The cost to put the LoC and long-term loan facility in place will be approximately US$2.4 million.

The government says any use of the funds will address needs resulting from the government’s loss of revenue and its increased expenditure related to COVID-19.

"It particularly increased expenditure by Government to support the vulnerable in our community and business entities across the Islands that have experienced financial hardship as a result of the pandemic," the statement added.


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